For nearly three decades, the India-Mauritius DTAA of 1983 was the golden corridor for foreign capital flowing into India. At its peak, Mauritius accounted for over 30 per cent of cumulative foreign direct investment into India, a number that tells lesser about Mauritius’s economic might and screams more about the architecture of global capital structuring. The corridor always worked simply, i.e. route your investment through a Mauritius incorporated entity, hold a Tax Residency Certificate issued by the Mauritius Revenue Authority, sell the Indian asset, and walk away with capital gains taxed only in Mauritius, where the effective rate, for most of the structures, was zero.
Tiger Global International II Holdings, III Holdings, and IV Holdings, these three Category 1 Global Business Licensed entities incorporated in Mauritius, followed precisely the same playbook that everyone use to follow. Between October 2011 and April 2015, they acquired shares in Flipkart Private Limited, a Singapore-incorporated holding company that, in turn, indirectly held the operating entities of the Flipkart group in India. The beneficial owner sitting above all three Mauritius entities was TGM LLC, a Delaware-incorporated investment manager headquartered in the United States. In 2018, as part of Walmart Inc.’s landmark USD 16 billion acquisition of a majority stake in Flipkart, Tiger Global sold its entire Flipkart Singapore shareholding to Fit Holdings SARL, a Luxembourg entity, realizing capital gains of approximately INR 131 billion (roughly USD 1.6 billion).
The structure was textbook. The shares were acquired before 1st April 2017,the very same date from which the 2016 protocol to the India-Mauritius DTAA vested source-country taxation rights on capital gains with India. Under Article 13(3A) read with Article 13(4) of the DTAA, shares acquired before that date were ‘grandfathered’. Capital gains remained taxable only in the seller’s country of residence, i.e., Mauritius. Tiger Global held valid TRCs. The structure was, on the face of it, impeccable.
What followed was a seven year legal journey that ended on 15th January 2026, when the Supreme Court of India, in The Authority for Advance Rulings (Income Tax) vs. Tiger Global International II Holdings, Civil Appeal No. 262/2026, delivered a judgment that has since been described variously as a ‘180-degree shift,’ a ‘paradigm reset,’ and ‘the end of the Mauritius play.’ This article is about what the Supreme Court actually held, which established notions it has dismantled, and what its GAAR jurisprudence means for the Indian tax landscape going forward.
Three Courts, Three Answers :— The Journey to the Apex
The dispute passed through three distinct adjudicatory stages, each reaching a different conclusion, which itself tells you something about the legal complexity the case presents.
The Authority for Advance Rulings rejected Tiger Global’s application at the admission stage itself, holding that the Mauritius entities were mere conduits with NO Employees, NO Physical office & NO Real Decision Making being taken place in Mauritius. Control sat with TGM LLC in Delaware. The structure was, in the AAR’s view, a preordained tax avoidance device.
The Delhi High Court disagreed. Routing through Mauritius, it held, is not inherently illegitimate. The grandfathering clause was clear; the investments were bona fide; a validly issued TRC from Mauritius established residence, as the Supreme Court itself had held previously in the case of Union of India v. Azadi Bachao Andolan (2003). Thus, the Delhi HC concluded, that the investments were bonafide in nature, and GAAR could not override an express treaty right that was preserved by a sovereign protocol between two countries.
The Supreme Court reversed and restored the AAR’s position. Now, the Supreme Court, rested it’s judgements, on 4 major pointers, that changed the entire landscape, for years to come —>
1. TRC Is Necessary, But No Longer Sufficient
The Supreme Court held that a Tax Residency Certificate, while a necessary precondition for claiming treaty benefits, is not conclusive proof of eligibility. This is a direct and explicit departure from the position in Azadi Bachao Andolan, where the Supreme Court had treated the CBDT’s Circular 789, instructing tax authorities to accept Mauritius TRCs as creating a near-indefeasible presumption of treaty entitlement. The distinction the Supreme Court now draws is between residency and substance. A TRC establishes that an entity is registered as a tax resident in a particular jurisdiction. It does not establish that the entity has genuine commercial substance in that jurisdiction, that it exercises independent decision-making, or that its primary purpose for existing in that jurisdiction is something other than accessing a favorable treaty. Now, Tax Authorities will be furthermore equipped and encouraged judiciously to look behind TRCs.
2. GAAR Can Override Treaty Grandfathering
This is the most analytically explosive pointer of the judgment. The grandfathering clause in Article 13(3A) of the India-Mauritius DTAA was introduced precisely to protect pre-2017 investments from retrospective taxation. It was a sovereign commitment, negotiated between two states, designed to create certainty for foreign investors. The Delhi HC had treated it as a near-absolute shield. But, the Supreme Court disagreed on this. The clear reasoning was that the GAAR provisions under Chapter X-A shall apply to a taxpayer even if their application results in consequences less beneficial to the taxpayer than those available under the DTAA. To put it simplistically, if GAAR is triggered, it can strip a taxpayer of treaty benefits including grandfathered benefits, notwithstanding the treaty’s express provisions.
3. Indirect Transfer + Lack of Commercial Substance = Taxable in India
The Supreme Court based on the provisions of Sec. 9(1)(i) read with Explanation 5, constituted the transfer of Flipkart Singapore shares to be indirect transfer of assets situated in India, since those shares derived substantial value from its Indian subsidiaries, capital gains on the sale of its shares were taxable in India as a matter of domestic law. Following the provisions of Sec.96, since the arrangement was indeed an Impermissible Avoidance Arrangement — the Mauritius entities lacking commercial substance, their control and management resting with TGM LLC in Delaware, the structure having no business purpose other than the treaty benefit, hence, Section 90(2A) was triggered and the DTAA benefit was denied.
4. The Burden of ‘Main Purpose’ Test and Commercial Substance
Following the definition of IAA under Sec. 96 of the Income Tax Act, 1961, an arrangement is rendered as impressible if its main purpose is to obtain a tax benefit and it either: lacks commercial substance (Section 97); creates rights and obligations not ordinarily created at arm’s length; results in misuse or abuse of the provisions of the Act; or is entered into in a manner not ordinarily employed for bona fide purposes. The entities failed this test on multiple grounds. These entities were were mere conduits with NO Employees, NO Physical office & NO Real Decision Making being taken place in Mauritius. All investment decisions were made by TGM LLC in the US. Board meetings were formalities. The funds originated from the US. The sole commercial rationale for the Mauritius domicile was the treaty benefit. Under Section 97(2)(a), an arrangement with an accommodating party whose main purpose is to obtain a tax benefit is deemed to lack commercial substance. The entities were, in the Supreme Court’s view, precisely such accommodating parties.
GAAR Now Has Teeth It Hasn’t Used Before
In the eight years since its commencement, GAAR had been invoked sparingly by tax authorities and had not produced a Supreme Court judgment until now. The Tiger Global case is the first Supreme Court ruling to directly confirm that GAAR by invoking provisions under Section 90(2A), can override treaty benefits, including grandfathered treaty benefits.
The immediate practical consequence is that GAAR is no longer a theoretical threat in international tax structuring. It is, as one practitioner described it to Business Standard, ‘a loaded gun that the Revenue now knows it can fire.’ Tax authorities have, in the weeks since the judgment, already cited Tiger Global in at least one ITAT proceeding involving a Singapore-resident entity with pre-2017 investments in India to deny treaty benefits on the basis that the entity lacked genuine commercial substance. The ruling has become an immediate precedent, not a long-term threat.
What ‘Genuine Commercial Substance’ Now Requires
With this ruling, investors and firms, now do have a judicially-endorsed checklist of what a genuine commercial substance to prove territory jurisdiction should be having – i.e. Proper Physical Presence (with office premises), Human Capital (employees), Decision Making (crucial operating and financial decisions to be taken in meetings held in the claiming territory itself), Fund Origination & Board Independence. Each of these now being a diligence item that any offshore structure must demonstrate. Investors with existing Mauritius or Singapore vehicles that match this profile should be reviewing their substance documentation immediately.
The Ripple Effect — Open Questions the Judgment Leaves
The Tiger Global judgment is landmark in scope but necessarily limited to its facts, leaving several critical questions unresolved. For Pre-2017 investments, that haven’t taken their exits, the Court confirmed that GAAR which is operative from AY 2018-19, can apply to exits even where the underlying investment was grandfathered. This means investors holding pre-2017 structures who have not yet exited now face conditional, not absolute, protection. The pending Blackstone Capital Partners case, involving a Singapore structure under the India–Singapore DTAA, is expected to be decided in light of Tiger Global, and if the ratio is applied directly, a similar outcome is likely. Another major uncertainty is what constitutes “adequate” substance: while the Court identified what Tiger Global lacked, it did not define the threshold that would suffice to survive GAAR scrutiny, leaving foreign investors in need of further guidance or litigation. Finally, whether the Revenue can reopen completed assessments for past exits like Carlyle Group’s exit from Metropolis Healthcare, and General Atlantic & Warburg Pincus’ exits from Airtel & IDFC First Bank particularly between the period where GAAR was not invoked remains unsettled and is already generating active debate among deal lawyers and tax advisors.
Conclusion
The Tiger Global judgment does not end treaty-based investing in India. What it ends is treaty-based investing without genuine commercial substance. The India-Mauritius and India-Singapore DTAAs continue to function; the capital gains provisions continue to apply where the entity claiming them is genuinely resident and commercially active in the treaty jurisdiction. What has changed is the evidentiary and doctrinal standard for making that claim. This is not, a hostile act toward foreign capital. India attracted more than USD 170 billion of cumulative FDI via Mauritius over two decades. The Supreme Court has not said that capital is unwelcome. It has said that the price of the treaty benefit is genuine commercial engagement with the jurisdiction that issues the treaty and that price, in the post-GAAR, post-BEPS, post-Tiger Global era, is non-negotiable. Structure is no longer a shield. Substance is.
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Disclaimer: This article is for academic and informational purposes only. It does not constitute legal or tax advice. Readers are advised to consult a qualified professional for their specific circumstances. The author has relied on publicly available judicial pronouncements and statutory provisions in preparing this article.
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